The End of "Hidden" Interest: How Mohammad Al Saadi Advocates Challenges Unlawful Bank Charges

Is your debt growing despite regular payments? In the UAE’s evolving financial landscape, many borrowers discover that their bank has been quietly applying compound interest—the practice of charging “interest on interest.” While banks often present these as automated system calculations, the UAE higher courts have sent a clear message in 2026: Unlawful interest accrual will not be tolerated.

وفي Mohammad Al Saadi Advocates and Legal Consultants, we specialize in the forensic deconstruction of banking facilities. With over 20+ years of experience in the Dubai Courts, we help clients challenge predatory interest structures and recover overpaid funds.

1. The Federal Supreme Court Precedent: Prohibition of Compound Interest

In a landmark 2025 ruling (reaffirmed in early 2026), the Federal Supreme Court underscored the strict application of Federal Decree-Law No. 23/2022. The court ruled that licensed financial institutions are prohibited from charging interest on accrued interest for both personal and commercial facilities.

  • The 10/10 Strategy: If your bank has “capitalized” unpaid interest—turning it into new principal to charge more interest—they are in violation of UAE public order. Mohammad Al Saadi Advocates utilizes court-appointed financial experts to audit your statements, identifying “interest-on-interest” loops that the naked eye cannot see.

2. Islamic Banking: The Dubai Court of Cassation’s 2026 Stance

A significant development in late 2025 and 2026 involves the Dubai Court of Cassation (DCC 1660/2026), which has reinforced that Islamic financial institutions cannot impose “late payment interest” or hidden fees that function as interest, even if labeled as “compensation.”

  • Actionable Insight: If you have a Sharia-compliant Murabaha or Ijara facility and are being hit with “delay penalties” that look like interest, your contract may be in breach of statutory principles. We proactively litigate to nullify these charges and adjust the outstanding balance in accordance with the law.

3. Challenging the "Interest Cap" and Transparency Failures

Under the CBUAE Consumer Protection Regulation, banks must provide a Key Facts Statement (KFS) and an Annual Percentage Rate (APR) that includes all fees.

  • Transparency Gaps: If your bank failed to disclose the true cost of borrowing at the outset, or if the total interest charged has exceeded the principal amount (a violation of the “Interest Cap” principle in many commercial contexts), you have a strong case for a court-ordered recalculation.
  • Forensic Audits: Our firm doesn’t just argue in court; we provide the evidence. We lead the forensic audit process to prove exactly how much a bank has overcharged you over the life of a loan.

Why Mohammad Al Saadi Advocates and Legal Consultants?

With a deep understanding of the UAE Civil Code and the latest Central Bank Circulars, our firm has successfully recovered millions in overcharged interest for our clients. We bridge the gap between complex banking math and clear legal justice.

“A bank’s automated error is not your financial burden. If your statement doesn’t add up, the law is your greatest asset.”

Is your bank overcharging you? Contact Mohammad Al Saadi Advocates in Business Bay for a forensic account review today.

 

Also Read:

The “Frozen Account” Crisis: Litigating Bank Negligence Under 2026 UAE Regulations